CREDIT MARKETS; Treasury Notes and Bonds Mixed

This is a digitized version of an article from The Times’s print archive, before the start of online publication in 1996.
To preserve these articles as they originally appeared, The Times does not alter, edit or update them.

Occasionally the digitization process introduces transcription errors or other problems.
Please send reports of such problems to archive_feedback@nytimes.com.

Dealers in Treasury securities took some profits yesterday following the rally on Friday, but overall prices were narrowly mixed in sluggish trading as traders awaited reports due this morning on consumer prices and the merchandise trade deficit.

In advance of the consumer price report, most economists were forecasting that because of declines in energy prices, the key inflation measure would show a modest two-tenths of a percent rise for February.

''I don't think any of the numbers will move the market that much unless they are way out of line with expectations,'' one government bond trader said. ''We are going to be in a very narrow trading range until sometime late this spring, when the Fed gets a better handle on where the economy really is.''

Concern about auctions of new Treasury securities prompted modest selling of short-term issues.

Tomorrow the Treasury is expected to announce the size of two-year and four-year note sales, which will take place on March 27 and March 28. Those sales are the start of a springtime round of financings that culminate with the Treasury's quarterly refunding auctions in early May.

''For the last three or four weeks we haven't seen much of anything,'' in the way of supply, the bond trader said. ''But starting next week and for the next six weeks we will get just about everything the Treasury has to sell. And there is no reason right now to buy in front of the supply, particularly before the two's and four's are announced.''

Some analysts were not yet ready to disregard the plunge in the Tokyo stock market.

''Investors are treating the incidents in Japan in a kind of isolation,'' said Brian J. Fabbri, chief economist at Midland Montagu Economics. ''I don't think that can persist, but there was no great rush to seek safe haven in the market today.''

Rumors About Japan

Once again rumors were rampant in financial markets around the world that the Bank of Japan would raise its discount rate by a full percentage point, to 5.25 percent, at a meeting today. But Mr. Fabbri and others said those rumors, which have circulated for weeks, were reflected in current prices.

Rates on new three-month and six-month Treasury bills were modestly higher at the weekly auction yesterday.

Three-month bills were sold at an average discount rate of 7.97 percent, up from an average rate of 7.96 percent at last week's sale.

Meanwhile, six-month bills sold at an average rate of 7.92 percent, up from 7.89 percent a week earlier.

In the secondary market for Treasury securities, concerns about the new Treasury notes helped to push down prices of short to intermediate term issues. Bond prices moved modestly higher.

You are already subscribed to this email.

By late in the day, the Treasury's 8 1/2 percent five-year notes were, offered at a price of 99 14/32, down 1/8 point, to yield 8.62 percent. And the 8 1/2 percent two-year notes were offered at 99 23/32 in late trading, down 2/32, to yield 8.65 percent.

Among bond issues, the Treasury's bellwether 8 1/2 percent bonds of 2020 were offered at 99 21/32, up 2/32, to yield 8.53 percent, unchanged from Friday.

In the corporate market, a number of companies took advantage of the recent relative stability in interest rates to price new debt offerings.

Among the issuers was the General Motors Acceptance Corporation, which offered $300 million of three-year notes through an underwriting syndicate led by Salomon Brothers.

The 9 1/4 percent notes, which mature March 15, 1993, were priced at $99.79, 67 basis points, or hundredths of a point, over the prevailing yield on the Treasury's 8 3/8 percent three-year notes at the time of pricing.

The issue is rated AA-3 by Moody's Investors Service and AA-minus by the Standard & Poor's Corporation.

Dow Chemical Notes

The Dow Chemical Company offered $200 million of 12-year notes through an underwriting group led by Merrill Lynch Capital Markets.

The 9.35 percent notes, which mature March 15, 2002, were priced at 100, 75 basis points over the prevailing yield on the 8 1/2 percent 10-year Treasury notes at the time of pricing.

The securities are rated A-1 by Moody's and A by Standard & Poor's.

Traders in the secondary market for investment-grade corporate bonds said the prices of most issues had risen by 1/8 point to 1/4 point.

Activity in the secondary market for tax-exempt municipal bonds was extremely lethargic, dealers said. Prices of most issues rose by about 1/4 of a point.

Following are the results of yesterday's auction of three-month and six-month Treasury bills:

A version of this article appears in print on March 20, 1990, on Page D00017 of the National edition with the headline: CREDIT MARKETS; Treasury Notes and Bonds Mixed. Order Reprints|Today's Paper|Subscribe